Cobalt Blue Holdings (ASX: COB) - Industry Partners in Discussion to Secure Supply

Cobalt Blue Holdings Limited is a cobalt development and energy storage company with a focus on bringing the Broken Hill Cobalt Project into production. The Broken Hill project is located in New South Wales, Australia. The company also seeks to identify and develop other green energy opportunities to expand its strategic cobalt portfolio, which includes battery technologies.

Matt Gordon caught up with Joel Crane, Investor Relations and Commercial Manager, Cobalt Blue Holdings. Mr. Crane has spent the majority of his career specialising in commodity and economic market analysis. His well-earned reputation in the industry has been gained through his ability to translate complex issues into concise conclusions. Joel brings an international perspective to Cobalt Blue. His extensive career portfolio includes 12 years working in top-tier global financial institutions (Morgan Stanley, Deutsche Bank) covering all major metals and bulk commodities - including the key battery raw material. For the five years prior to joining Cobalt Blue, he was with Rio Tinto (Singapore and Melbourne), where, as a Senior Manager, he led teams within the internal Market Analysis Group that were tasked with conducting and communicating market and business analysis to the executive leadership. In this role, Joel directly supported the CEO with economic and commodity market analysis.

Company Overview

Cobalt Blue is set to become one of the world’s largest ethical suppliers of cobalt, a battery-ready product, for use in utility-scale renewable energy storage, for thousands of home energy storage systems, and millions of electric vehicles. Cobalt Blue Holdings seeks to invest in energy storage technologies that complement the production of cobalt in commercialising batteries and associated energy storage technologies. The company was founded in 2016 and is headquartered in Australia. It is listed on the Australian Stock Exchange (ASX: COB), and the OTC Markets (OTCQX: CBBHF).

Cobalt Blue is developing the Broken Hill cobalt project, which will be a 3,500t integrated mine and refinery in the heart of Broken Hill in New South Wales, Australia. In recent times, mining companies have observed a drop in share prices. The company’s stock price looks very similar to many other asset classes. According to the company, the macro environment is the primary contributor to the selling-off in the sector. Rising interest rates, higher cost of living, falling asset values, and cyclical sectors are often affected during these market cycles.

It is important to note that China is considered one of the primary drivers of the commodity markets. The commodity world continues to be China-centric, where everyone is waiting for the next round of stimulus that is yet to come through. The company valuations have disappointment built into the prices. Since so many valuations are getting closer to annual lows, it is a good time to pick up exposure.

Cobalt Blue is looking to manage the aspects of the project which are directly under its control, such as the operations. The company is currently running a demonstration plant and has had encouraging results so far. It is continually trying to update the market with new developments.

The company is currently in the midst of a DFS (Definitive Feasibility Study). This study will prove that the Broken Hill cobalt project is economically viable. The company’s results so far are in line with the findings from previous studies.

Over the past month, the company successfully demonstrated that it can upgrade the ore from 600ppm (parts per million) to 700ppm, which can be further upgraded to a sulphide concentrate featuring grades up to 4,500ppm. Upgrading the grade results in the rejection of 75%-80% of the ore’s mass, which is directly placed onto the dry stack. This is a very important process in proving a project’s economic viability. This is because two-thirds of the project costs occur beyond the concentration steps toward the final project. As a result, only one-fifth of the mass is involved in the project which helps in achieving lower operational costs. The company has been successful in proving the project fundamentals that it put forward 2 years ago.

The company is in discussions with industry partners and investors. In recent times, legislation has been passed by multiple countries to support the sector and improve battery supply chains. In the US, this is being achieved through the Inflation Reduction Act. While a lot of people believe that the act will end up increasing inflation in the end, the company understands that the legislation is actually aimed at localising the critical minerals market.

These changes are extremely important for developing companies. Cobalt Blue’s Broken Hill project is based in the mining-friendly part of Australia. In order to be on the FDA-friendly list with the US, companies are trying to internationalise the battery market supply chain.

Market Landscape

While the battery chemistry and technology outlook keeps changing on a consistent basis, the market continues to upgrade the demand. There has been a lot of talk in the market to thrift cobalt and nickel out of a battery, both of which have highly-volatile and unpredictable price cycles. According to the company, this is all part of an evolution of a sector that is still in its infancy.

Countries like China do not have a problem with battery ranges due to high density. These countries are able to thrift the expensive commodities and come up with cheaper alternatives. However, these alternatives tend to be less efficient and heavier. At the same time, the demand for cobalt and nickel for these batteries continues to expand on a daily basis, and the market keeps upgrading it.

Cash Position

Cobalt Blue’s shares are currently priced at $0.68. The company has had a 12-month high share price of $1.08. In the current market cycle, some people are choosing to take exposure. The company is almost halfway through the DFS, which is a long process. Since the company is not funded, the market is still valuing it as a developer as opposed to a company with revenue. It will take the company between 3-4 years in order to start generating revenue.

The company is consistently updating its website and making ASX announcements on new findings. It has hired Worley, GHD, and SKR, three of the biggest contractors in Australia. All three parties are consistently on-site in order to help the company with the ongoing DFS. The study is expected to conclude by Q3 2023. In the meantime, the company is being evaluated as a developer as opposed to a miner.

Cobalt Blue is fully-funded through the DFS with about $9M in the bank. The funds will take it all the way through the next year. The company also received a $15M grant from the Australian Critical Mineral office which will be deployed for the DFS. Notably, the company has invested a lot in the demonstration project which is now starting to pay dividends. The company is now proving the findings from the PFS (Preliminary Feasibility Study) 2 years ago. It is also working on various aspects of the project such as energy consumption, reagents requirements, and whether the end product will be cobalt MHP (Mixed Hydroxide Precipitate) or sulphate.

Ongoing Operations

Cobalt Blue’s demonstration project is up and running 24x7 shifts. The company is looking to constantly update the market with new developments. It is currently in advanced discussions with a number of EV (Electric Vehicles) makers and battery makers that have shown a lot of interest.

The company has also kept the project site open for visits. At the same time, the company is travelling to different countries to visit the headquarters of interested EV makers and battery makers. In recent times, the market has seen a lot of deals being announced. According to the company, miners aren’t used to having discussions with non-traditional partners. As a result, these discussions often require a lot of time and effort.

The company is open to entering a partnership with a party that is looking to be a part of the process. The Broken Hill project is based in a highly favourable jurisdiction and has been granted major project status by both the state and federal governments. The company is now in a position to invite the relevant people to the table for a number of discussions. Since the company is in direct talks with battery makers and EV makers, having a relationship with the government is quite helpful.

The company’s representatives recently visited Korea and the US on a trade mission. As the company gets closer to project and product development, a well-developed relationship with the government and the sector places the company in a prime position to better understand the trends. It is well-placed to recognize the market’s needs.

Cobalt Blue’s chances at success are greatly improved by the amount of time and money it has put into its demonstration plant, training its personnel, and entering discussions with various governments. There aren’t many other organisations that are in the company’s position. However, Cobalt Blue continues to be valued similarly to other companies that are several stages behind. The company anticipates that it is undervalued in the market.

To find out more, go to the Cobalt Blue website